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Economy in Brief

Mortgage Applications' Rebound Cut Short
by Tom Moeller February 1, 2006

During the last week of January, the total number of mortgage applications reversed most of the prior week's increase with a 5.1% decline. Nevertheless, because of increases during the first three weeks of the month, mortgage applications still rose 5.2% on average in January versus December.

A 8.0% w/w decline in purchase applications was to the lowest level in four weeks and lowered the average level in January 0.6% below December.

During the last ten years there has been a 50% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales

In contrast, applications to refinance were relatively firm as a 1.5% decline last week only dented the fairly strong increases of the prior four periods. As a result the average level of refis in January rose 17.7% versus December.

The effective interest rate on a conventional 30-year mortgage rose 15 basis points w/w to 6.44% versus an average 6.48% in December and a high November average of 6.52%. The effective rate on a 15-year mortgage rose about the same amount to 6.09%. The interest rates on 15 and 30 year mortgages are closely correlated (>90%) with the rate on 10 year Treasury securities.

The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site here.

MBA Mortgage Applications (3/16/90=100) 01/27/06 01/20/06 Y/Y 2005 2004 2003
Total Market Index 626.8 660.5 -11.3% 708.6 735.1 1,067.9
  Purchase 435.7 473.7 -1.0% 470.9 454.5 395.1
  Refinancing 1,747.2 1,773.9 -22.5% 2,092.3 2,366.8 4,981.8
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